Posts Tagged ‘decision making’

There is a simple method for making decisions, from trivial to life changing, that most people find easy to understand but impossible to follow. In a talk entitled “How To Do Precisely the Right Thing At All Possible Times,” Daniel Gilbert, Professor of Psychology at Harvard University, author of “Stumbling on Happiness,” and host of the PBS television series “This Emotional Life,” discussed research in psychology, neuroscience and behavioral economics that explains why it is indeed possible, yet incredibly difficult, to do the right thing at all possible times.

Gilbert’s talk was sponsored by the Living Well in the Law program at Harvard Law School, which endeavors to complement the teaching of the skills and substance of the law with attention to and development of each student’s sense of purpose as both a professional and a person.

Gilbert explained that our own minds thwart our attempts to make good decisions because our brains evolved to function in a world very different from the one we live in today, one in which decisions were limited to finding a mate and living in small communities, not purchasing long-term care insurance or making other complex decisions.

“We’re on an ancient vessel and can’t evolve quickly enough, but we’re not stupid,” Gilbert said. “The way we got to the moon wasn’t through intuition—we used science and disciplined rational thinking. We can use the same approach to make any kind of personal decision. The question isn’t whether we know how to do precisely the right thing at all the right times. The question is whether we will actually use what we know.”

He said that it should be simple to make a decision—all we need to do is multiply the odds of getting what we want by the value of getting it. But people make two classes of errors when trying to make decisions: errors in odds and errors in value.

Gilbert discussed the psychological phenomena leading to errors in odds, including the imaginability error and the optimism bias. We miscalculate the odds of a particular outcome because the imaginability error causes us to calculate odds based on how easy it is to bring something to mind. For example, people overestimate the odds of dying in a tornado or from using fireworks because those deaths make headlines, while they underestimate the odds of dying by drowning or from asthma, which are in reality far more common. The optimism bias, on the other hand, is simply attributed to the fact that we’re wildly optimistic about the odds of getting what we want, he said. Together, the imaginability error and the optimism bias distort our ability to anticipate odds of a particular outcome.

“The optimism bias occurs because, when you practice doing things, they become easier to do,” Gilbert said. “Motivational speakers tell you to practice thinking about success and not even let thoughts of failure cross your mind. If you just keep thinking about how your plans will work without being willing to entertain equally how they’re not going to work, success becomes easier and easier for you to imagine, and thus the imagineability error is at play. We practice thinking about success so much that it’s inevitable that we’ll overestimate the likelihood that it’s going to happen.”

Calculating how happy we’ll be if we actually achieve the outcome we want—the value of that outcome—is even more difficult. Anticipating value is so difficult because every form of judgment works by comparison, Gilbert explained. To illustrate that point, he used a decision very familiar to law students—deciding between two job offers. Job 1 offers a salary of $100,000, but everyone else at that firm will earn $105,000. The salary for Job 2 is $90,000, but everyone else will earn $85,000. Gilbert said that most study participants respond that Job 2 will make them happier because, although they’ll make less money, they won’t feel underpaid. But for that to be the right decision, one who chooses Job 2 must then walk around all day in that new job thinking about how wonderful that extra $5,000 is. In reality, people will not spend time making that comparison once they dive in and start the job.

“You forget about the setup. The comparison you make when determining the value of getting what you want is no longer the comparison you make once you get it, so it bedevils your attempt to make a good decision,” Gilbert said.

He warned that there is really nothing we can do to ensure that we make the right decisions—there’s no pill we can swallow, class we can take, or book we can read that will prevent us from making these errors in odds and value because they’re simply so natural to us.

“How can you do the right thing at all possible times? You probably can’t,” he said. “The best thing you can do is to catch yourself making these errors and know to watch out for them. Ask if yesterday’s price really matters today, or if today’s comparison will really matter tomorrow. We can stop ourselves not from making errors, but from completing errors.”

To take a gratifying, low-paying job or a well-paid corporate position, to get married or play the field, to move across the country or stay put: The fact that most people face such choices at some point in their lives doesn’t make them any easier. No one knows the dilemma better than law students, who are poised to enter a competitive job market after staking years of study on their chosen field.

When faced with a tough choice, we already have the cognitive tools we need to make the right decision, Daniel Gilbert, professor of psychology at Harvard and host of the PBS series “This Emotional Life,” told a Harvard Law School (HLS) audience on Feb. 16. The hard part is overcoming the tricks our minds play on us that render rational decision-making nearly impossible.

Gilbert’s talk, titled “How To Do Precisely the Right Thing at All Possible Times,” was part of Living Well in the Law, a new program sponsored by the HLS Dean of Students Office that aims to help law students consider their personal and professional development beyond the fast track of summer associate positions and big-law job offers.

There is a relatively simple equation for figuring out the best course of action in any situation, Gilbert explained: What are the odds of a particular action getting you what you want, and how much do you value getting what you want? If you really want something, and you identify an action that will make it likely, then taking that action is a good move.

Unfortunately, Gilbert said, “these are also the two ways human beings screw up.”

First, he said, humans have a hard time estimating how likely we are to get what we want. “We know how to calculate odds [mathematically], but it’s not how we actually calculate odds,” he said.

We buy lottery tickets, because we “never see interviews with lottery losers.” If every one of the 170 million losing ticket holders were interviewed on television for 10 seconds apiece, we’d be having the image of losing drilled into our brains for 65 straight years, he said.

“When something’s easy to imagine, you think it’s more likely to happen,” he said.

For example, if asked to guess the number of annual deaths in the United States by firework accidents and storms versus asthma and drowning, most people will vastly overestimate the former and underestimate the latter. That’s because we don’t see headlines when someone dies of an asthma attack or drowns, Gilbert said. “It’s less available in your memory, but it is in fact more frequent.”

Then there’s the fact that we’re prone to irrational levels of optimism, a pattern that has been documented across all areas of life. Sports fans in every city believe their team has better-than-average odds of winning; the vast majority of people believe they’ll live to be 100.

A study of Harvard seniors, Gilbert gleefully reported, showed they on average believed they’d finish their theses within 28 to 48 days, but most likely within 33 — “a number virtually indistinguishable from their best-case scenario.” In reality, they complete their theses within 56 days on average.

Still, he said, calculating our odds of success is actually the easy part. “What’s really hard in life is knowing how much you’re going to value the thing you’re striving so hard to get,” he said.

When we consider buying a $2 cup of coffee at Starbucks, for example, we don’t compare the satisfaction of a morning caffeine jolt against the millions of other things we could purchase for $2. Rather, we compare the value of that cup of coffee against our own past experiences. If the same coffee only cost $1.50 yesterday, we might balk at paying $2 for it today.

“One of the problems with this bias, this tendency to pay attention to change, is that it’s hard to know if things really did change,” he said. “Whether things changed is often in the eye of the beholder.

“It turns out that every form of judgment works by comparison,” he said. “People shop by comparison.” Unfortunately, our comparisons are easily manipulated, and comparing one option with all other possible options is an impossible task.

Real estate companies, for example, show potential buyers “set-up properties,” rundown fixer-uppers that they actually own, to lower their clients’ expectations for houses that are actually for sale.

In his own lab, Gilbert’s research team had two groups of college students predict how much they would enjoy eating a bag of potato chips. The group that sat in a room with chocolates on display predicted they’d enjoy the chips less, while the second group — stuck in a room with the chips and a variety of canned meats — predicted much higher enjoyment of the salty snack.

But when the students rated their enjoyment of the chips while they were eating them, those differences disappeared. While their previous visual judgment was tainted by comparison, their judgment of the actual taste was not.

“The comparisons you make when you’re shopping are not the ones you’ll make after you’ve bought,” Gilbert said.

The human mind evolved to deal with different dilemmas than the ones we face today, Gilbert explained. Our ancestors weighed short-term consequences to ensure their survival, evolving a snap-judgment process that often serves us poorly when making long-term decisions such as buying a home, investing in the stock market, or making a cross-country move.

The brain “thinks like the old machine it is,” Gilbert said. “We are in some sense on a very ancient vessel, and we are sailing a very ancient sea.”

Still, he told his audience, we have the ability to overcome these evolutionary roadblocks to self-aware, smart decision-making, as long as we acknowledge our biases.

“We’ve been given that gift,” Gilbert said. “The question is, will we use it?”

In the last decade, many cognitive and social psychology researchers have been inspired by the notion of “embodied cognition” – that cognition is grounded in actual bodily states, and that cognition takes place in the service of action. Consider two examples: (1) when wearing a backpack people perceive hills to be steeper than when not wearing one; (2) when holding a cup containing a hot drink people rate another person as more warm and friendly than when holding a cup containing a cold drink.

Findings such as these suggest that behavioral law and economics’s emphasis on “irrationality” in decision making could benefit by considering work in embodied cognition. Accordingly, this paper exploits recent research and theory on embodied cognition to find lessons for behavioral law and economics and theories of rationality.

Lawyers intuitively understand that individual differences matter for legal judgments and decision making, and that calling forth certain concepts can affect how people interpret and judge evidence. But they generally overlook the influence of mindset on those very same judgments–that is, they fail to consider how situational cues can prime a way of making sense of the world that affects how people perceive evidence and receive arguments. We present two studies demonstrating the effect of priming a particular type of mindset–a focus on either achieving success or avoiding failure–on attitudes about criminal justice policy and willingness to take action based on limited evidence in a criminal case. We then discuss other mindsets that are potentially relevant to legal judgments and decision making, offering hypotheses about their likely effects and highlighting the need for further empirical research.

Avishalom Tor has written an article, “The Methodology of the Behavioral Analysis of Law” (forthcoming 4 Haifa Law Review 237 (2008)) that will be of particular value for our readers interested in economic behavioralism. You can download the paper for free on SSRN. Here’s the abstract.

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This article examines the behavioral analysis of law, meaning the application of empirical behavioral evidence to legal analysis, which has become increasingly popular in legal scholarship in recent years. Following the introduction in Part I, this Article highlights four central propositions on the subject. The first, developed in Part II, asserts that the efficacy of the law often depends on its accounting for relevant patterns of human behavior, most notably those studied by behavioral decision scientists. This Part therefore reviews important behavioral findings, illustrating their application and relevance to a broad range of legal questions. Part III then argues that the behavioral approach is empirically driven, engaging in both the theoretical application of extant empirical findings to the law and the generation of new, legally relevant, experimental and observational evidence. As this Part shows, moreover, each of these behavioral genres possesses different methodological strengths and weaknesses, and they therefore both substitute for and complement one another, in different respects. Part IV explains that the behavioral approach encounters a series of “gaps” between the type of empirical evidence provided by behavioral decision researchers and the data required to resolve legal questions. Legal scholars should therefore be aware of these gaps, which may limit the usefulness of extant behavioral evidence for legal analysis. This Part also addresses what legal scholars may do to overcome these gaps and distinguish real gaps from imaginary ones. Part V completes the body of the Article, arguing that the behavioral analysis of law is simultaneously normatively neutral and normatively relevant. It is normatively neutral because the behavioral analysis of law is not committed to any specific legal goal or value system. This fundamental neutrality, in turn, makes the behavioral approach a versatile instrument, which can help generate important normative conclusions in the service of scholars evaluating the law based on any normative criteria – from justice to welfare and more. Part VI concludes.